In a press conference on Thursday, Tommy said he was “hopeful” that the language would be included in a final deal.
“This is the most important thing to me,” he said, “preventing the central bank from being politicized” and being misused by pressuring municipalities and corporations to bail out.
“This is not an attempt to attack the Biden administration in any way or to weaken our economy,” Doomi said.
Joe Biden is preparing to enter the White House and the economy is facing a new recession amid the re-emergence of the corona virus.
But Tommy said only a handful of projects supported by the Caris Act money would be affected by the arrangement. “This is not a comprehensive review of the central bank’s emergency powers,” he said.
In the event of a major recession, the central bank has the power to provide credit to any borrower to ensure the proper functioning of the financial markets.
The central bank made extensive use of that power during the financial crisis of 2008, including bailing out companies that are considered to be economically interconnected, such as AIG. Then, under the 2010 Dot-Frank Act, the central bank was required to create only “broad-based” credit schemes for a subcommittee of companies, rather than lending to just one company. Any such plan must be signed by the Treasury Secretary.
At the outset of the epidemic, when major credit markets began to stagnate, the central bank used a number of emergency schemes, such as 2008, to lend to companies against the network for businesses that owed everything from aggregated credit card loans to debt consolidation. The scheme is designed to provide more credit to consumers and businesses by increasing the demand for those debt securities.
The central bank and the treasury used CARES legal funds to cover any losses under that scheme. That is – under the restrictions suggested by Domi – the Central Bank could not open another such scheme without the approval of Congress.
Many of the newly used measures in this emergency cannot be taken by the central bank, in which the municipal loan scheme and the “main street” business loan scheme were developed by order of Congress.
After the economic shocks from the epidemic triggered a panic and raised fears of a full-scale debt crisis, corporate bonds could not be bought. That plan The most controversial of the central bank During this crisis, however, lawmakers, including Doomi, have hailed it as successfully restoring order to allow cheap borrowing without the need to turn to the government.
For its part, the central bank has said it wants to continue with emergency plans until the crisis is over. However, Chairman Jerome Powell said he accepted Treasury Secretary Steven Munuch’s explanation that the projects should be halted by the end of the year.
He declined to comment at a press conference on Wednesday on whether he would accept a new explanation from a new treasury secretary. He also denied that the central bank has plans for future emergencies.
“We have officers and we will use them if they are needed, if the law allows them to do so,” Powell said.
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